Nevada improperly paid Medicaid claims for hospital-caused conditions

The state of Nevada has failed its federally mandated obligation to refrain from paying Medicaid claims for conditions that the hospital caused after the patient entered the hospital, an HHS Office of Inspector General (OIG) report has concluded. In fact, the OIG was unable to determine the extent of the overpayments because Nevada’s paid claim data does not even track so-called provider-preventable conditions (PPCs). Nevada, however, has concurred with the OIG’s recommendations for improving its PPC-compliance processes and has announced plans to address the shortcomings (OIG Report, No. A-09-15-02039, May 2018).

Background. PPCs are conditions that patients acquire after checking into the hospital, most commonly infections but also including illnesses the patient did not have when he or she was admitted to the hospital, foreign objects left in the body after surgery, surgery on the wrong body part, or even surgery on the wrong patient. Under Medicaid regulations, inpatients are assigned a principal diagnosis code as well as possible multiple secondary diagnosis codes. One of those secondary codes, called present-on-admission indicator codes (POA codes), are reported as a Y (condition present at the time of admission), N (condition not present at the time of admission), U (documentation insufficient to determine if condition present), or W (provider unable to determine clinically whether condition was present at time of admission).

ACA. The Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) prohibits federal payments for PPCs. Federal regulations require that any Medicare claim paid by the state be reduced by the amount attributable to the PPC. Nevada has a state plan that requires the state Medicaid agency to comply with federal requirements on nonpayment for PPCs. Under the state plan, the state Medicaid agency will identify PPCs through prior authorization reviews and retrospective reviews, which means that the state will review and authorize all inpatient hospital stays before reimbursement occurs.

OIG review. For its report, the OIG reviewed all state agency claims from July 1, 2012, through June 30, 2014, which totaled more than $346 million. The OIG determined that Nevada’s policies and procedures were inadequate to identify PPCs on claims. The OIG could only determine that improper Medicaid payments "may" have been made because the state agency’s paid claim data could not be used to identify PPCs. The OIG concluded that the state agency failed to identify PPCs on claims for inpatient hospital services because it (1) failed to use the updated list of Medicare hospital-acquired conditions; (2) failed to correctly identify PPC diagnosis codes on that list; and (3) failed to perform retrospective reviews of all hospitals’ inpatient billing data. When an inpatient hospital did submit a POA code to identify whether a condition existed, the state agency never acted to determine whether the claim should have been reduced.

Furthermore, even though a research contractor provided the state agency in May 2014 with a fiscal year 2013 report on possible PPCs, the state agency never reviewed the report to determine whether payments should have been reduced. In May and June of 2017, the state agency contacted providers directly to request documentation on possible PPCs. As of the time this OIG report was prepared, however, no claims had been reduced as a result of those 2017 requests.

Policies and procedures. More specifically, the OIG determined that Nevada’s policies and procedures were inadequate to identify PPCs for three reasons: (1) the state used an outdated list of hospital-acquired conditions that excluded some PPCs; (2) the state had no specific policies for the research contractor to conduct retrospective reviews, which meant that the reviews that were performed were not performed on all hospitals; and (3) the state had no policies for reviewing PPCs that the research contractor identified to determine if the payments should have been reduced.

Recommendations. As a result of its findings, the OIG has recommended that the state Medicaid agency (1) strengthen its policies and procedures to review hospital claims for hospital-acquired conditions and perform retrospective reviews of billing data to identify PPCs and (2) review retrospective reports for the OIG’s audit period to determine whether payments should be reduced for PPC claims made during that period.

Agency response. The state agency concurred with the recommendations and has promised to make the necessary to changes to improve its PPC tracking.

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